Chevron, Ecuador, and the Organized Shake-Down, Part II

Below we write about the legal and political campaign against Chevron claiming that the company is responsible for environmental damage in Ecuador, a potent spin effort that will reach another high point tomorrow at the company’s annual shareholders meeting in San Ramon, Calif. The role of Trillium Asset Management as the point group in the attack-via-shareholders against Chevron is especially interesting as an example of the trial lawyer/activist combine at work against U.S.-based businesses, and it’s worth a little more attention.

In November of 2003, representatives of two of the three signatories to the proponents’ solicitation letter met with one of the American trial lawyers and others to plan a campaign to “pressure” Chevron. The email memorializing that meeting reports that Trillium Asset Management agreed to take the lead with regard to stockholder proposals. Trillium has submitted a resolution referencing the Ecuador case at each subsequent annual stockholders meeting. And in each year since the November 2003 meeting, the Trillium stockholder proposal has been used as a platform for carefully orchestrated media campaigns, protests and related activities – all of which appear to occur at the direction of the American trial lawyers in the case.

In their campaign for this year’s annual stockholder meeting, the plaintiffs’ lawyers and their colleagues have added a new dimension to their pressure strategy: a campaign to generate fear in the investment community. Having added a string of well-connected lobbyists to their team, we suspect that the plaintiffs have begun approaching public pension funds to hypothesize adverse scenarios concerning the outcome of the case. The plaintiffs’ lawyers themselves have approached analysts who cover our stock to convey similar messages. We understand that these presentations are heavy on the farthest extensions of the plaintiffs’ legal arguments regarding the trial in Ecuador, but light on the facts and the obvious weaknesses of their case.

Trillium has also sent out a “warning” to investors, Beebe writes, based on a study generated by a small research outfit and drawing on the plaintiffs’ arguments.

Legal issues of fiduciary responsibility are beyond our ken, and certainly there’s a long history of people buying stock in order to influence a company’s operations. Trillium has been around since 1982 and has its own lawyers, so we expect they think themselves on firm legal footing. And we assume most people who invest with Trillium know that the outfit exists to push its activist agenda.

Still, there’s something just wrong about an investment management firm working behind the scenes with trial lawyers to do damage to the company the firm is investing in. If the campaign succeeds in forcing a settlement, Chevron’s stock will take a hit and its long-term earnings — and probably those of other companies that invest abroad in similar circumstances — will be restrained. When pitching their services to potential clients, perhaps Trillium’s more accurate message would be: Invest through us, and we’ll attack the reputations of selected companies, in the processing reducing their value.

Unfortunately, there probably are people for whom that would be an attractive appeal.

The “facts” used to attack Chevron are wrong, the public relations manipulation ugly, and the goals ultimately damaging to people and investors who own Chevron stock. And it’s all part of a sophisticated legal and PR campaign that gets far too little attention.

As Chevron’s general counsel, Charles James, said today in a conference call with bloggers today.

I’ve asked people to ask themselves a very simple question: If these plaintiffs thought for just one second that they were going to get an enforceable judgment out of the courts of Ecuador for some multibillion dollar amount, why this show? Why is all of this going on? Why are they attempting to pressure the investors? Why all this media stuff?

*Disclosure: Chevron is paying for several bloggers, including me, to visit the former Texaco/Petroecuador sites in the Ecuador Amazon sometime in the future. The company is not making any demands on what we write as a result. Chevron is a member of the NAM.